Water and Sanitation & Trans Caledon Tunnel Authority deviations & expansions: hearing with Minister

Public Accounts (SCOPA)

06 June 2018
Chairperson: Mr T Godi (APC)
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Meeting Summary

The Department of Water and Sanitation (DWS) and the Trans Caledon Tunnel Authority (TCTA) briefed the Standing Committee on Public Accounts (SCOPA) on deviations and expansions in 2016/17. The meeting was however adjourned early, only to reconvene in the afternoon after the Department appeared not to be prepared. Members expressed dissatisfaction with the responses from the Department and requested it to gather the necessary information required for successful engagement. It was noted that the Department of Water and Sanitation had deviations amounting to R470 million for the year 2016/17, which was considerably high.

There were several deviations that the Department went ahead with despite not having National Treasury approval, which was cited for its culture of lawlessness and disregard for the Constitution. Of concern was a deviation of R342 million for Babereki Consulting Engineers which was not approved by Treasury as DWS did not provide evidence showing that it had tested the market. Following this deviation, DWS confirmed that it had taken action by opening disciplinary cases against employees involved. Clarity was sought on a deviation of R5.8 million for a presidential visit to Melmoth. Questions were raised on DWS’s use of deviations for long-term projects which could not be deemed an emergency such as the deviation of R646 million for the upgrade of Thukela-Goedertrouw by Aecom SA when it was going to take 18 months.

For Trans Caledon Tunnel Authority, a deviation of R1.1 million for the payment of a company secretary was found to be extravagant when DWS could have used its internal resources. Concerns were raised on a deviation to supply chemicals for the Central and Eastern basin treatment plants that would cost R5 million per month, while a deviation to appoint Edward Nathan Sonnenbergs for legal services did not make sense because DWS had its own legal team. DWS defended this deviation citing the need for independence as ENS was appointed to investigate matters that involved the CEO. On contract expansions, clarity was sought on a contract awarded to Mokolo Crocodile Consultants which was initially R770 000 but expanded to R8 million especially as the entity had already incurred expansions of R46.9 million. TCTA explained that the expansion was issued at the close of the contract to repair a pipeline which had been exposed by floods. The deviations for Intelligent Water Solutions (IWS) and the CMC-PG Mavundla Joint Venture were discussed as well as the contract expansion which Treasury did not approve for CMC-PG Mavundla Joint Venture.

The DWS Deputy Director-General for National Water Resource Infrastructure was questioned about involvement in the awarding of Vuwani Project contracts. Both TCTA and DWS were questioned about unapproved contract expansions.

Members expressed their disappointment at DWS for having no regard for the Constitution and the fiscus and no commitment to or consciousness about assisting poor people.

The Minister was pleased with the toughness of the Committee to DWS about service delivery and promised the DWS would do the best that it could and report back to the Committee on DWS was going to do the best that it could and would report back to the Committee on its internal strategy to deal with the concerns raised.

Meeting report

The Chairperson welcomed the Minister of Water and Sanitation. The purpose of the meeting was to understand the reason for contract expansions and for deviations, which are meant to cater for emergencies but had become the norm.

Deviations by Department of Water and Sanitation (DWS)
Ms T Chiloane (ANC) led the questioning, noting the 36 deviations by DWS amounting to R470 million for the year 2016/17. Of these deviations, seven were emergency contracts, 21 were sole service provider contracts and four were preferred service provider contracts. These deviations indicated that DWS did not follow Treasury Note 3 which allowed for deviations in the case of emergencies and sole service providers only. What were the reasons for DWS not following these instructions?

Ms Deborah Mochotlhi, DWS Acting Director General, responded that it was not by choice that DWS did not follow Treasury regulations. Certain circumstances prompted the need for deviations, as in the case of drought where DWS needed to act immediately. Deviations occurred in the case of one sole service provider or in the case of construction under the Water Trading Entity (WTE), where DWS would have incurred costs of standing time or delays, if it waited for approval from Treasury.

The Chairperson told the Acting DG that she was appointed to sort out the mess in DWS and asked her to be upfront and candid.

Ms Chiloane clarified that she was asking for an explanation why DWS continued with deviations that were not approved by National Treasury.

Ms Mochotlhi made it clear that she had no intention of hiding anything and her responses were guided by information provided to her by her team. DWS had systems in place but most times things were picked up when it was already too late. Management had however resolved to check the weaknesses of the system going forward, to prevent what had been happening. It was only that time had been a constraint for interrogation into the reasons provided for deviation and irregular expenditure.

Ms Chiloane asked who was doing deviations prior to the current DG’s assumption of office. Were they still at DWS?

Ms Mochotlhi responded that those employees were still part of DWS.

Ms Chiloane asked if the DG therefore meant that no disciplinary measures were taken against employees for deviations.

Ms Mochotlhi replied that she had engaged the internal audit team which provided a report on consequence management for disciplinary cases from 2013-2018. The report will be provided to the Committee.

Ms Chiloane gladly accepted the submission of the report.

Mr M Booi (ANC) told the DG that she should have been aware of her responsibility and should have updated herself prior to the meeting. As accounting officer, the DG should account on behalf of DWS.

Ms Chiloane asked how many deviations were rejected by National Treasury.

Ms Mochotlhi replied that none were rejected on the Main Account but three were rejected for WTE.

Ms Chiloane asked why the deviations continued despite rejection from Treasury.

Ms Mochotlhi replied that it was unfortunate that the deviations continued, but the WTE Chief Finance Officer would explain further.

Ms Chiloane asked if the DG was prepared for the meeting because she should have known what was happening in DWS.

Ms Mochotlhi replied that she was prepared for the meeting. She explained that one of the deviations was for the Appointed Professional Provider for specialised engineering services. These services were rendered by an individual who used to work as a designer for DWS but later retired, and it was deemed prudent that the individual continue providing services to save on time. The other deviation was for Oracle which serviced DWS machinery and it was difficult for the project manager to get another service provider.

The Chairperson stated that the essence of the question was to understand the point of permission if DWS went ahead with deviation.

Ms Chiloane asked if the DG was aware of Babereki Consulting Engineers, Black Dot Construction, Mr H Juiriex and DHI Water and Environmental Health. A deviation on the Main Account for Babereki Consulting of R346.2 million was rejected by Treasury because there was no evidence that the market was tested. The same applied to Black Dot Construction. For Mr H Juiriex, the DWS reasons were not justifiable, while R30 million for Evusasa Media emergency communication for Day Zero was not supported as it was not considered to be an emergency. Could DWS comment on these deviations?

Ms Mochotlhi explained that the deviation for Babereki Consulting was for bulk water supply but she did not have sufficient information to respond. She asked her colleague to provide more information.

Ms Zandile Makhathini, Deputy Director-General: National Water Resource Infrastructure (NWRI) replied that the deviation for Babereki Consulting was for bucket eradication. It was a contract that was inherited from the previous administration but the project continued because it was already 80% in scope, and it would have been difficult to start with a new contractor.

The Chairperson raised a concern about lawlessness in DWS, which went ahead with deviations that had been rejected by Treasury. Was Treasury being unreasonable?

Mr Solly Tshitangano, National Treasury Chief Director: Supply Chain Governance, explained that it depended on the time at which departments approached Treasury. If departments approached Treasury to rubber stamp decisions that they had already made, Treasury would not approve.

The Chairperson asked if the project was already 80% complete, what was the point of going to Treasury?

Ms Chiloane asked what then should be done. DWS was non-compliant, lawless and had not taken any disciplinary measures to recoup the money. Deviations pointed to the lack of planning within DWS. What was the value of Treasury Regulations if DWS went ahead with deviations that had been rejected?

The Chairperson hoped that the Minister was taking note of the concerns raised by the Committee, on the failure leadership and a culture that did not belong to the public service.

Ms Chiloane still wanted to know how many deviations DWS went ahead with despite no support from Treasury. The Acting DG had earlier mentioned that there were no deviations from the Main Account, yet the ones cited were from the Main Account.

Ms Mochotlhi clarified that from the Main Account, DWS did not have deviations that it continued with, without the approval of Treasury. The deviations mentioned by Ms Chiloane were for 2017/18 but she was under the impression that the committee required information on deviations for 2016/17. There were however a number of disciplinary cases in relation to Babereki Consulting and the Internal Audit team had provided a report that indicated a reduction in the number of outstanding cases. DWS was looking into the weaknesses of its system to inform and prevent the occurrence of deviations, but unfortunately had disjointed reporting because of the lack of time.

Ms Chiloane asked if the Acting DG was aware that DWS was incurring irregular expenditure because of deviations that were not supported by Treasury.

Ms Mochotlhi was aware of the implications of deviations and had held a meeting with the audit committee to discuss ways of regularising expenditure, because some expenses could be condoned.

Ms Chiloane asked about the deviation for the presidential visit to Melmoth.

Ms Mochotlhi replied that it was a hurried event that had not been planned for by DWS.

Ms Chiloane did not understand the reason for deviation. Perhaps if it had been a Government Communication and Information System (GCIS) event she would have understood.

The Chairperson explained that he had seen the event and tried to recall the explanation given by DWS.

Ms N Khunou (ANC) appealed to the Chairperson to let DWS respond.

Ms Mochotlhi replied that the deviation was prior to the Treasury Note implemented in May 2016, because the event took place in March 2016.

Ms Chiloane said that there had always been a Treasury Note specifically for deviations. How did the presidential visit involve DWS? Was it a conference for water?

Ms Mochotlhi did not think that the event was related to DWS.

The Chairperson asked the Acting DG not to speculate with the Committee. The event had everything to do with water, but that did not mean that processes were followed.

Mr Booi asked the Acting DG to give the Committee an answer and not to consult with the Minister. How could the Acting DG give information to Parliament and not know what was going on? Could answers be provided to the Committee?

Mr E Kekana (ANC) suggested that the Committee proceed with other matters and deal with the Melmoth deviation later because the meeting was being delayed unnecessarily.

Ms Chiloane expressed frustration with DWS for its lack of accountability. How could DWS have deviations over the amount of R5 million and not know what had happened, yet information provided to the Committee came from DWS. Several SCOPA meetings had been postponed without the Committee receiving any responses within the stipulated seven days. Could DWS provide answers?

The Chairperson made reference to the scattered information provided by DWS which made it difficult to engage. The Committee was interested in details that were specific and not generalised. It was therefore proposed that DWS come back at 2 o’clock with a much finer report.

Mr Kekana agreed that DWS must back with detailed information and not speculations.

Ms Khunou added that those who approved deviations or were present at the time the approvals were granted, should provide answers to the Committee.

Mr T Brauteseth (DA) pointed out that what was happening was completely unacceptable because DWS was famous for non-compliance or malicious compliance. The old tactic of dumping Committees with a lot of paper just before the meeting, was not going to work because SCOPA had done its research and it was going to expose DWS. The decision for DWS to come back in the afternoon with more answers was supported but a clear message was sent concerning an inquiry that was being worked on by SCOPA and the Portfolio Committee on Water and Sanitation.

The meeting was adjourned at this point but reconvened in the afternoon at 2 o’clock.

Afternoon session

The Chairperson reiterated that the objective of the meeting was to assist the Committee in understanding why DWS needed the deviations it made. He stressed that the Committee wanted deviations to be the exception and not the norm. There was just no way that a Department would deviate nonetheless if its request to deviate and was not granted. DWS needed a paradigm shift.

Ms Chiloane asked if Mr Sifiso Mkhize was around.

Ms Mochotlhi replied that he had reported sick.

Ms Chiloane asked if there was anyone present from DWS who dealt with projects.

Ms Mochotlhi replied that Ms Zandile Makhathini was present.

Ms Chiloane said that it was unfortunate that Mr Mkhize had reported sick because the letters written to Treasury requesting deviations were signed by him.

The Chairperson requested that a sick note for Mr Mkhize be sent to the Committee the following day.

Ms Mochotlhi agreed to send the sick note once Mr Mkhize reported back to the office

Ms Khunou said that Parliament could not wait for Mr Mkhize to get back because he had signed so many documents that he needed to account for. Could communication proving that he was sick, be provided to the Committee?

The Chairperson asked when it was communicated that he was not well.

Ms Mochotlhi confirmed that it was communicated on Monday 4 June 2018 by his secretary. The sick note had been attached on the system.

Ms Chiloane asked about the presidential visit to Melmoth. If Treasury had not approved, why did DWS go ahead with the deviation?

Ms Mochotlhi explained that the presidential visit had been reported to Treasury after it had already happened. The event on 3 April 2016 was initially planned for the Minister but it was upgraded to a Presidential event because of drought in that area. Communication was received on 29 March 2016 and the DDG communication requested approval from the then Acting DG on 31 March 2016, who gave approval on the same day. Once again, the DG emphasised that the information requested by the Committee was at short notice and she therefore apologised for the lack of preparedness.

Ms Chiloane understood that the event was initially for the Minister meaning that the programme had been planned. She understood that there was drought but what exactly was the deviation for?

Ms Mochotlhi replied that DWS did not have a breakdown of the deviation.

The Chairperson asked if there was a paper trail and Ms Mochotlhi replied that there was no paper trail.

Ms Chiloane asked who Khokho Trading was. How could an amount of R5.8 million be spent on a presidential visit? Perhaps the Committee should check the budget for presidential visits to see if they cost that much.

Mr V Smith (ANC) said that for money to have been spent it must have gone through the finance or procurement department. Was there anyone from finance or procurement present? Who signed the cheque? Somebody must know what the deviation was for. If the DG did not have answers there was surely someone from finance or procurement who could assist in answering questions.

Ms Manukuza Mbali, Chief Director; Finance and Accounting explained that the submission did not go through the finance office, but directly from the DDG to the Departmental Bid Adjudication Committee (DBAC).

The Chairperson asked if anyone from DBAC was present.

Mr Brauteseth asked if there was anyone in the DWS delegation who could provide information on the deviation. How could an entire delegation, which probably cost a lot of money, not be able to answer a simple question on deviation of R5.8 million for a presidential visit?

Mr Smith asked Treasury to shed light on what the money was for. The event was pre-planned with the deviation only seeking extra money, but DWS could not provide any answers. The Committee should investigate if DWS was just playing hardball or truly did not understand.

Mr Solly Tshitangano explained that it was initially a ministerial event where DWS was expecting 10 000 people but later changed to a presidential event where DWS was expecting 15 000 people. This meant that everything that had been planned for was going to change. DWS however approached Treasury when it had already done everything. It asked for a deviation which later changed to a variation but was not supported by Treasury because there was no supporting documentation.

The Chairperson remarked that Treasury seemed to know more than DWS did.

Ms Chiloane asked about the deviation for Babereki Consulting which the DG said happened in 2017/18. Why was the project not finished on time?

Ms Mochotlhi referred the question to Ms Makhathini.

Ms Makhathini explained that the Bucket Eradication programme came with a court order to allow Babereki Consulting to continue. The Bucket Eradication programme did not have an adequate budget in the previous year, which led to the spending of most of the money earmarked for water.

The Chairperson asked why there was a deviation to appoint Babereki Consulting.

Ms Makhathini could not account for reasons there was a deviation to appoint Babereki Consulting, because she took over the programme when it was already two years old. The programme was reporting to the Director General at the time.

Ms Chiloane said that the reasons given by Ms Makhathini were not the same as those written to the Treasury. The letter said that Babereki Consulting had previous experience on the project and had provided satisfactory quality work on the previous contract. DWS had financial constraints therefore Babereki Consulting was not able to implement bulk infrastructure during the contract time frame.

The Chairperson was trying to understand the appointment as an isolated case.

Ms Makhathini clarified that the letter Ms Chiloane was referring to was a request for a deviation to allow Babereki Consulting to complete its scope of work. It was however rejected by Treasury and DWS did not proceed with the deviation. The process of appointing a new contractor was currently taking place.

Mr Booi asked if Ms Makhathini was misleading Parliament.

Ms Makhathini replied that she was not misleading Parliament but that the question was broad. She had been explaining other deviations relating to Babereki Consulting because this specific deviation did not occur.

Ms Chiloane asked how many deviations DWS had approved for Babereki Consulting. Between R342 million and R346 million, which of the two was correct?

Ms Makhatini replied that she was talking about deviations from the normal procurement process because of how the consultants were appointed.

The Chairperson interrupted to clarify that the question was in reference to the two amounts

Ms Chiloane asked which amount was approved by Treasury between R342 million and the R346 million.

Ms Makhathini replied that Treasury did not approve the deviation. DWS had not approached Treasury for the deviation of R342 million.

The Chairperson further asked which of the two had been approved by Treasury.

Ms Makhathini replied that DWS had implemented the deviation for R342 million for Babereki Consulting.

Ms Chiloane asked if the deviation was approved by Treasury.

Ms Makhathini replied that it was not.

Ms Chiloane asked why DWS went ahead with the deviation if it was not approved.

Ms Makhathini replied that it was because there was a court order. It happened before she took over the programme

Ms Chiloane said that Treasury did not approve the deviation because DWS did not have evidence showing it had tested the market. It however proceeded with the deviation without the approval of Treasury. Was Babereki Consulting the only company that DWS could deal with?

The Chairperson sought clarity from Treasury

Mr Solly Tshitangano explained that the facts would differ because an out of court settlement was agreed on after a dispute occurred between Vharanani Properties and Babereki Consulting. It was agreed that work be given to the two consulting companies, but Treasury did not know the figures apportioned to each. It was not clear if payments to Babereki Consulting after December 2017 were for work related to the out of court settlement or deviations not approved by Treasury.

Ms Makhathini clarified that the payments were for the out of court settlement.

The Chairperson asked for the date of the out of court settlement

Ms Makhathini was not exactly sure but it was before April 2017.

Mr D Ross (DA) sought clarity on the deviation resulting from a court order. If it was an out of court settlement it did not have an impact on the legality of adhering to the process of procurement. It was therefore incorrect to say that DWS deviated following a court order.

The Chairperson clarified that DWS did not go ahead with the deviation that was rejected by Treasury.
Ms Chiloane said that deviations were stressful and should not be accepted by the Committee. This was because DWS continued with deviations despite them not being supported by Treasury. Further, those who approved the deviations were no longer there.

Mr Brauteseth asked about a deviation of R420 000 for the Talent Emporium Academy to urgently facilitate a strategic planning session. What did the Talent Emporium Academy do and why was R420 000 spent to facilitate a strategic planning session? Why was it so urgent that it needed to have a deviation?

Ms Makhathini explained that it was not only a strategic planning session but DWS was nearing the end of its financial year.

The Chairperson asked what the Committee should accept: her explanation or the DWS submission? Did it mean that the submission was inadequate? The Chairperson was not impressed that there was information missing in the submission.

Ms Makhathini explained that the process went further to assist with DWS’s business process.

Mr Brauteseth asked what the Talent Emporium Academy did for DWS as she seemed to be missing the point.

Ms Makhathini reiterated that it was for the strategic planning session and the business process.

Mr Brauteseth asked about R6.4 million paid to Sulzer Pumps for the maintenance and repair of all pumps at Tienfontein Pump Station for 12 months. Why were Sulzer Pumps the only people who could maintain pumps at Tienfontein Pump Station?

Ms Makhathini explained that Sulzer Pumps was maintaining its own pumps because it was the manufacturer of the pumps. DWS had been facing maintenance problems when other service providers fitted different parts that caused the pumps to deteriorate.

Mr Brauteseth asked who signed the deal allowing Sulzer Pumps to be the sole service provider.

Ms Makhathini replied that Tienfontein was an old scheme that was built using only Sulzer pumps. Going forward, DWS considered using different pumps for new schemes that were probably cheaper.

Mr Smith thought that maintenance was part of planning for management. If DWS did not plan for maintenance, it must go back and recoup the money from the suppliers. Maintenance cannot be something that was unforeseen and therefore steps should be implemented to recover the money. If the pumps were old did DWS not expect that the pumps would break at some point? If this was the case, money should be recouped unless DWS could provide another explanation as to why it requested R6 million.

Ms Makhathini replied that DWS had a maintenance plan in place but it experienced a situation where other service providers would put in different parts, and therefore it chose to remain with Sulzer Pumps.

Mr Brauteseth asked if Sulzer Pumps were only in the Free State.

Ms Makhatini replied that there were many Sulzer Pumps all over the country.

Mr Brauteseth asked how much DWS paid Sulzer Pumps given that there was another deviation of R6 million for the Camden Pump Station. Sulzer Pumps appeared to have a great deal because they installed the pumps and had a sole supplier contract to maintain the pumps in perpetuity.

Ms Makhathini replied that the schemes mentioned were old and she had inherited them as they were.

Mr Brauteseth asked if only Sulzer Pumps could fix its own pumps or was it that the supplier was telling DWS not to use other service providers, which was as good as securing a monopoly.

Ms Makhathini replied no.

Mr Brauteseth asked if Sulzer Pumps was not the only service provider, why did DWS not go to market to see who else could maintain the pumps.

Ms Makhathini agreed that there were a number of companies that could fix Sulzer Pumps but those companies would still have to go and buy parts from Sulzer Pumps, thereby delaying the process.

Mr Brauteseth asked how long it took for other companies to get pumps from Sulzer Pumps.

Ms Makhathini replied that it took eight months.

Mr Brauteseth did not believe that it would take eight months to get parts because it did not make sense.

Ms Makhathini reiterated that her explanation still stood.

The Chairperson clarified the point that Mr Brauteseth was making was tha, it was not logical that Sulzer Pumps would take two days when it was fixing pumps but would make other service providers wait for eight months.

Mr Brauteseth said that an investigation was necessary to recover funds because it was possible that DWS had such bad management, that it took somebody eight months to get a part.

Ms Khunou asked how many companies in South Africa produced pumps.

Ms Makhathini was not aware.

Ms Khunou said that because she did not know, it meant that she agreed with Treasury that DWS did not test the market.

Ms Makhathini explained that there were no plans for asset management at the time, because these plans were signed in the last financial year.

Mr Brauteseth asked about the deviation of R646 million for the emergency upgrade of Thukela-Goedertrouw for 18 months. Could DWS explain why Aecom SA was the only company that could assist? How could an emergency be 18 months long?

Ms Makhathini replied that it was at a time when there was no clear time frame on the period of an emergency. It was an emergency because Richards Bay only had 12 weeks left to Day Zero and DWS was under pressure from the business community. Aecom SA was selected from the DWS internal database where an evaluation was done and it was the lowest bidder.

Mr Brauteseth asked what DWS was doing to deliver water to the people of Richards Bay, if water was going to run out in 12 weeks yet the project was 18 months. How did these two periods line up? What was actually being done at the Thukela-Goedertrouw scheme?

Ms Makhathini replied that there were two interventions, the first one was approved by Treasury and the second was to take water from the Tugela River to augment the resource in Richards Bay
Mr Brauteseth asked if the process was going to take 18 months, how was it going to assist people who were running out of water in 12 weeks.

Ms Makhathini replied that at the time the issue of having emergencies limited to three months had not been clarified.

Mr Brauteseth did not understand why a sole supplier was used on the basis of an emergency. Was the emergency created?

Ms Makhathini replied that the emergency was not created but unforeseeable and unavoidable.

The Chairperson asked how drought was unforeseeable.

Mr Brauteseth asked who owned Aecom SA. What were their credentials?

Ms Makhathini referred to her earlier statement that DWS had used its own database to appoint suppliers and Aecom happened to be the lowest bidder.

Mr Smith referred to several deviations on the report that had been approved by the DG before DBAC had. If this was the case, then there was a problem because the DBAC approval was just a formality. Was the report correct?

Ms Mochotlhi explained that there were instances where the accounting officer would have signed before approval from DBAC. The documents in this instance showed “noted” meaning that the Accounting Officer would take responsibility of the decision made, without seeking approval from DBAC.

The Chairperson asked what the normal process was.

Ms Mochotlhi replied that approval would first be granted by DBAC followed by the Accounting Officer.

Mr Booi asked the DG to quote the law or rules and not to generalise.

Ms Mochotlhi replied that there were situations that led to the DG signing before the matter went to DBAC. This depended on the urgency of the matter.

Mr Brautesth asked what was the point of DBAC recommending the deviation for Aecom SA two days after the DG had approved R646 million.

Mr Smith did not agree with the approach where the DG first signed. What would have happened if DBAC disagreed with the DG?

Ms Mochotlhi replied that because she was never in that situation, she could only think of what would happen.

Mr Smith told the DG that she must not think but instead know, because she was defending the indefensible. Deviations signed without following the expected procurement process must be rejected out of hand, because it was non-compliance with legislation. Treasury must account if it had approved deviations which had not been complied with.

Mr Kekana asked the DG to confirm if there was transgression of the law.

Ms Mochotlhi agreed that there was transgression of the law.

Mr Kekana asked what the DG was planning to do about the transgression.

Ms Mochotlhi replied that the audit team would look into what happened and if further investigations were needed, they would be done. Disciplinary measures would be taken on the same.

Mr Kekana asked if the DG had already confirmed the transgression, what was the point of investigating whether there was transgression.

Ms Mochotlhi clarified that the investigation was not to check if there was transgression, but to see who transgressed and find out why they transgressed.

The Chairperson informed the DG that the investigation did not look into why people transgressed because they had already committed transgression.

Ms Mochotlhi confirmed that action would be taken.

Ms Khunou sought clarity on the March and December dates for upgrading the Thukela-Goedertrouw scheme.

Ms Mochotlhi clarified that the December deviation was requesting the appointment of Aecom SA while the March one was requesting approval of the financial proposal submitted by Aecom SA for the upgrade of the Thukela-Goedertrouw scheme.

The Chairperson sought clarity on the approval process that Ms Makhathini had previously mentioned.

Ms Makhathini explained that the Infrastructure branch requested the Accounts Control Management (ACM) unit to provide a list of companies from its database, who were contacted and asked to bring proposals in three weeks. These proposals were evaluated by an evaluation panel that was approved by DBAC, where the panel settled on appointing Aecom SA. ACM later said that Aecom SA could not be appointed because it already had another job. The DG was alerted to this outcome as DWS had already prepared to go to Richard’s Bay. The DG then made the decision to appoint Aecom SA because it was the cheapest.

Mr Brauteseth asked DWS to provide a full investigation on the awarding of the contract and specifically who owned Aecom SA. Why did DWS have to spend an excess of R10 million on events such as public participation or water exhibitions, which were all approved on the same day (15 April 2016)? Why was there a sole supplier for these events? Could DWS comment on the 14 deviations for the renewal of IT licences, software and infrastructure?

Ms Mochotlhi replied that the sole service providers developed some of the DWS systems but DWS did not test the market upfront because these service providers came to DWS just before the licences were about to expire. There was a new Chief Information Officer (CIO) who took over the project of looking at DWS systems to ensure that it was not the same service provider who provided the licences and support.

Mr Brauteseth asked if the DG was saying that the expiry of licences was an unavoidable cost.

Ms Mochotlhi could not confirm if it was an unavoidable cost or not. However, she emphasised that she had since engaged the CIO to assist on licences. There had been a change of the IT service provider for the entire Department.

Mr Brauteseth was worried about Departments engaging in contracts with IT service providers because they did not have their own capacity. DWS lacked a planning and tracking system which tracked the expiry of licences. Could DWS clean up its current and future renewals of licences? Could DWS answer the question on sole suppliers for public participation and the water exhibition? Could it explain what the water exhibition was for?

Mr Kekana asked for a detailed breakdown of activities for deviations on public participation and the water exhibition.

Ms Chiloane asked if DWS complied with the 30 day payment rule. What was the relationship between DWS and Rand Water?

Ms Mochotlhi replied that it was one of DWS’s entities and there were instances where money was paid to Rand Water for work done on behalf of DWS.

Ms Chiloane asked about the project run in Bushbuckridge in 2013 for bulk water infrastructure that was 80% complete. To date, the consulting company had not been paid while Rand Water had been contracted to do work by DWS, and had been paid. Could DWS provide a response to the Committee within seven days?

Deviations by Trans Caledon Tunnel Authority (TCTA)
Ms Chiloane asked if TCTA had a legal unit and human resource unit.

Ms Zodwa Manase, TCTA Board Chairperson, replied that these units were present.

Ms Chiloane asked TCTA to explain the deviation for the process of headhunting a Company Secretary.

Ms Manase replied that the R1.1 million was a deviation for the payment of the actual work done by the company secretary, after the company secretary was suspended. This deviation was approved by Treasury.

Ms Chiloane asked if there was anyone within DWS to replace the suspended company secretary.

Ms Manase replied that there was no replacement and that was why it approached Treasury for approval to appoint somebody.

The Chairperson asked how long the period was.

Ms Halima Nazeer, TCTA Chief Finance Officer, replied that it was for seven months.

Ms Chiloane asked if the deviation was to pay someone else while the Company Secretary was suspended. What exactly was the deviation for?

Ms Manase explained that the deviation was to appoint a company that performed company secretary services for TCTA.

The Chairperson asked what the logic was. How cost effective was this?

Ms Manase replied that at the time it did not have the capacity to perform the duties of a company secretary and therefore had to go out to look for one. This was approved by Treasury.

The Chairperson said that the approval of Treasury was not the end of the story.

Ms Manase could not answer if the appointment was cost effective or not.

The Chairperson thought that the company was just being extravagant because it was using public money.

Ms Chiloane found it unfair to South Africans that TCTA would go and appoint a big company to provide company secretary services, instead of using internal capacity or interns, given that it was after the company secretary had been suspended.

Ms Manase replied that TCTA wanted a company secretary that would provide quality work because the former company secretary was suspended for the quality of her work. It however did not recall doing an cost effective analysis.

Ms Chiloane said that the letter addressed to Treasury was to appoint recruitment agencies for conducting the executive search/headhunting for a company secretary. Were they talking about two different things?

Ms Manase replied that they were talking about two different things because the R1.1million she was referring to was for the payment of work done by the actual company secretary and not the executive search company.

Ms Chiloane said that Treasury supported the deviation on condition that all potential recruitment agencies registered under the Central Supplier Database (CSD) were invited to participate. Could TCTA provide an explanation?

Mr Leonard Radzuma, TCTA Chief Risk Officer, clarified that the intent was to headhunt a permanent company secretary but the company was not successful in appointing a permanent company secretary

Ms Chiloane asked for the name of the company that was appointed to act as a company secretary and the name of the company that was supposed to assist in the recruitment of a company secretary.

Ms Manase replied that the name of the company appointed to act as a company secretary was Corpstart Limited. The process of appointing a permanent company secretary began with an internal search which failed. This was when it approached Treasury to seek a deviation for the appointment of a recruitment company to assist in the process.

Ms Chiloane asked if TCTA was saying that the company appointed to assist in the recruitment of a company secretary, did not deliver.

Ms Manase explained that it used its own internal search process but failed. It then approached Treasury for approval to appoint a company to assist in the recruitment of a company secretary. The search for a company secretary was ongoing and it had not paid anyone yet.

Ms Chiloane asked how far it was in appointing the permanent Company Secretary.

Mr Radzuma replied that interviews had been conducted by the Board, but the Acting CEO would provide more information because he was part of the process.

The Chairperson asked if Ms Chiloane was more interested in understanding why TCTA asked for a deviation when there were many companies in the country.

Ms Chiloane said she was just trying to understand the responses.

Ms Manase said that it went to Treasury after internal processes failed. It had interviewed for a temporary company secretary but had not yet appointed anyone. It had not yet appointed a company to assist with the recruitment of a company secretary as this process was still being managed by supply chain.

Ms Chiloane asked about the deviation for a grid emergency pipeline of R12.9 million following a ministerial directive in July 2016. The deviation was recommended by the CEO on 25 January 2018 and not supported by Treasury.

Mr Johann Claassens, TCTA Executive Manager: Project Management and Implementation Development (PMID), replied that Treasury did not support the deviation because it was a closed tender process. TCTA had since changed it to an open tender process but was waiting for necessary funds from DWS.

Ms Chiloane asked if TCTA continued with the project.

Mr Claassens replied that TCTA intended to continue with the project provided that it got upfront funding from DWS

Ms Chiloane asked why it took so long if the ministerial directive was for 2016.

Mr Claassens replied that the appointed contractor, DWS Construction East, was the construction division of DWS. TCTA experienced delays because of the inability of DWS to procure materials necessary to execute the work. It had since been decided that TCTA would procure on behalf of DWS, provided that funds were paid up front.

The Chairperson sought clarity on DWS Construction East. Was it the name of a company or the regional office of DWS?

Mr Claassens clarified that it was the internal construction unit of DWS

Ms Chiloane expressed worry over the delay of such projects meaning that the contractors were not meeting the project requirements. When was the tender for DWS Construction East advertised and closed. What were the reasons for the delay?

Mr Claassens replied that the delay was caused by the construction unit which could not proceed with procurement of materials for the project.

Ms Chiloane asked if DWS had given TCTA any money for the project

Mr Claassens replied that TCTA had received an initial amount but it was not enough for long lead items.

The Chairperson asked how a directive could be issued if DWS had no money. If the directive was to use the DWS internal construction unit but TCTA wanted to have an open tender, was it suggesting that DWS did not have the capacity?

Mr Claassens replied that TCTA had no problem with DWS doing the work. The problem was encountered in the inability of DWS to procure materials required for the project.

The Chairperson asked if the inability to procure was because DWS did not have money.

Mr Claassens could not confirm that it was because of lack of money.

Ms Chiloane asked about the deviation on 2 October 2017 to appoint a supplier to supply chemicals for the Central and Eastern basin treatment plants. What was being supplied?

Ms Halima Nazeer replied that it was for the supply of chemicals to be used in the acid mine drainage (AMD) plants for operation and maintenance.

Ms Chiloane asked how much the deviation cost.

Ms Nazeer could not recall the amount.

Ms Chiloane referred to a letter from Treasury where the deviation cost R5 million per month. How long was the deviation for?

Mr Radzuma replied that it was not able to get approvals because of administration issues in the Board. Ordinarily, the two different service providers who operated the Eastern and Central basin would have been contacted to supply the chemicals, but management took a decision to get the lime and chemicals directly, further reducing cost. TCTA then approached Treasury for approval to go ahead with the process.

Ms Chiloane referred to a letter from Treasury where the reason for the deviation was that Intelligent Water Solutions (IWS) and the CMC-PG Mavundla Joint Venture contracts ended on 30 September 2017. Through the emergency process, the institution appointed Proxa and Trecava to provide human resources and security. TCTA was to assume the remainder of services, including the supply of chemicals as the current lime would only last two days. This was because the previous extension did not make allowance for the supplier to refill the silos, as it was estimated that a new contractor would be appointed to procure. What did the TCTA planning entail in this regard?

Mr Radzuma replied that DWS had embarked on a tender process to appoint the operators. It was true that the contracts of IWS and CMC-PG Mavundla had come to an end. TCTA had finalised its adjudication processes in August 2017, with two companies recommended to the Board but because of unforeseeable circumstances, the board meeting did not take place. Management therefore identified an emergency clause through their delegation of authority.

Ms Chilone asked why the Board was not able to sit.

Ms Manase replied that the meeting was cancelled at the last minute.

The Chairperson asked why the meeting was cancelled at the eleventh hour.

Ms Manase replied that the Board Chairperson at the time cancelled the meeting and then resigned. An explanation for cancellation was never provided.

Ms Chiloane raised questions of leadership instability within TCTA. Was TCTA done with the process of supplying chemicals or was it going to deviate again?

Ms Manase replied that contracts had already been signed and deviations were not foreseen. On approval, anything above a certain contingency would need approval by the Board.

Ms Chiloane asked about the deviation to appoint Edward Nathan Sonnenbergs through single sourcing. What was the reason for this?

Mr Radzuma explained that the Board needed an investigation into the IWS appointment on the Central Basin. TCTA had not expected that the process would exceed R500 000 and at that point it was viewed as an emergency. The scope of work was unfortunately extended by the Audit Committee and the deviation was declined, because TCTA approached Treasury after it had already exceeded the amount of R500 000.

Ms Chiloane asked if the legal unit was familiar with the country’s labour laws.

Ms Manase replied that the investigation involved the former Acting CEO and because TCTA wanted to maintain independence, it decided to appoint an external body.

Ms Chiloane asked about the deviation to appoint Silumwa Attorneys through single sourcing. What was this for?

Mr Radzuma indicated that TCTA had a panel of legal advisors which had expired.

The Chairperson said that the panel did not just suddenly expire. Why had TCTA not renewed the panel?

Mr Radzuma replied that the process of getting new lawyers failed.

The Chairperson asked how the process failed.

Mr Radzuma replied that it was because of how TCTA structured its tender document.

The Chairperson said that essentially it meant that there was no legal unit in TCTA.

Mr Radzuma confirmed that TCTA had a small legal team but it had outsourced some of its services such as the drafting and negotiating of loan agreements.

Ms Chiloane found deviations for single sourcing for legal advice to be suspicious.

Mr Radzuma agreed that there were areas where TCTA was unable to assemble panels for legal and recruitment services due to failed tenders. Treasury had raised the same issue with TCTA but it was working to improve its processes.

Ms Manase added that TCTA had appointed someone for six months to review the supply chain department because of failed tenders.

Ms Chiloane raised concern that deviation for the legal division had not been supported by Treasury, but TCTA went ahead with the deviation. The responses from TCTA were not good enough because it cannot be that Treasury could not assist TCTA for all five deviations.

Mr Solly Tshitangano said that TCTA and other departments took advantage of the R500 000 threshold because departments approached consultants with the plan of spending R500 000, but once work commenced, it exceeded the threshold. Treasury could not approve ex post facto because the Treasury Note required prior approval for single sourcing contracts.

TCTA Contract Expansions
Ms Khunou asked about Mokolo Crocodile Consultants which was initially awarded a contract of R770 000 on 19 August 2011, but was expanded to R8 million. Could TCTA justify this expansion?

Mr Claassens replied that the R8 million was a variation order but the initial contract award price was R660 million. The R8 million variation order was issued at the financial close of the contract to repair the pipeline which had been exposed by floods.

Ms Khunou asked if it was difficult for the entity to have planned for this. Why was Mokolo Crocodile Consultants not doing maintenance if the contract had already been awarded to them?

Mr Claassens replied that the directive for Mokolo Crocodile Consultants was to fund and implement a project, which would be handed back to DWS for operational maintenance. It related to remedial works that had to be done right at the end of the project, before TCTA could hand over the project to DWS in good state.

Ms Khunou asked Treasury to explain why the variation was not approved.

Mr Solly Tshitangano explained that TCTA requested the expansion after work had been done and according to Treasury Regulations, Treasury could not approve work that had already been done.

Ms Khunou said that TCTA should have planned for its projects. What were the reasons for TCTA approving its own expansions before getting permission from Treasury? TCTA should be asked to pay back the money.

Mr Claassens replied that it was correct that variations which exceeded a certain amount should have the approval of Treasury. TCTA could not plan the expenditure because damage to the pipes was caused by rain. There was urgency to use the contractor who was still on site to repair the damaged pipes.

Ms Khunou said that the reasons given were not the same as what was submitted by TCTA.

Mr Claassens clarified that he had been referring to the variation for the flood event which was different from what had been submitted. For the variation to undertake further study on the Environmental Impact Assessment (EIA), DWS requested TCTA to make use of the existing service provider of the Mukolo project, to further undertake the EIA study of Phase 2 of the Mukolo project. TCTA internal process supported the variation but it was rejected by Treasury because TCTA had not tested the market.

Ms Khunou asked TCTA for a report showing that it had tested the market.

Mr Claassens replied that TCTA had not tested the market but presented a business case for single sourcing, which was approved internally. This was because the previous consultant who provided the EIA study on Phase 1 of the Mukolo project, was a DWS employee and was knowledgeable.

Ms Khunou said TCTA was approving the same people and therefore not empowering other service providers.

Mr Claassens emphasised that TCTA had no particular preference for service providers for the project. It only made sense at the time to use the same consultant as for Phase 1.

The Chairperson said that TCTA should have used the law and not its own sense.

Ms Khunou asked about the extension of the contract for Setchem to supply polyacrylamide to Eastern and Central basin for R2.154 million. Could TCTA explain the contract? What was the background of Mr Radzuma and how long had he worked for TCTA?

Mr Radzuma replied that his background was in audit, risk management and compliance, and he had worked for TCTA for about eight years.

Ms Khunou asked if the approvals or requests for approval were fair, equitable and competitive given that some projects from 2013 had not been paid.

Mr Radzuma agreed that TCTA should have planned ahead but it was unfortunate that some projects requested deviations, not because it did not want to comply with the PFMA but because of the circumstances surrounding the deviations. TCTA had done a detailed analysis of what the Committee had asked TCTA to present. Upon reflection, there were certain transactions and processes that would have been handled differently.

Ms Khunou emphasised the lack of planning for CMC-PG Mavundla Joint Venture where TCTA knew that there was going to be additional work but did not plan. R43 million had already been paid and TCTA kept expanding the project. Where was TCTA getting the money from if Treasury did not approve the expansions? TCTA had already incurred expansions of R46.9 million.

The Chairperson hoped that the Minister was taking note because it raised a political and administrative question of whether people were really up to the task of running public institutions excellently.

Ms Khunou said that there was a problem in security projects across departments. How could a security project be started without TCTA knowing that the contract would come to an end. Departments were extending and deviating because they wanted to give contracts to their friends because they were benefiting.

Mr Kekana asked if the Executive Manager: PMID has a delegation of authority for approval of variations.

Mr Claassens replied that he has a delegation of authority but within the contingency amount approved for within a particular contract, and it had to be approved by the Board.

Mr Kekana asked if he made a recommendation to the Board.

Mr Claassens replied that the Board approved a certain amount of contingency, whose delegation of authority lay with the CEO but in terms of operational delegation, that authority lay with the Executive Manager: PMID.

Mr Kekana asked if the approval was within the law of Treasury Regulations.

Mr Claassens replied that approval before the implementation of the Treasury regulation was within the law. The problem arose after May 2016 where prior approval of Treasury was not obtained.

Mr Kekana asked if it was malicious compliance for TCTA to say that work was initiated without the approval of Treasury because Treasury did not approve ex post facto. This statement did not give any reasons to the Committee.

Mr Claassens replied that TCTA had submitted a request for condonation which had details of every variation order to the Chief Procurement Officer (CPO).

Mr Kekana asked about the ceiling for variation orders. Had TCTA complied with the provisions of the law?

Mr Claassens replied that the ceiling was 20% or R20 million.

Mr Kekana asked him to confirm that some of the amounts were not broken down so that the variation order was below the ceiling amount.

Mr Claassens confirmed that none of the amounts on the report had been broken down.

Ms Manase further explained that TCTA had a protocol on approvals for condonation. The Audit Committee conducted investigations on irregular expenditure and checked that all necessary steps had been followed before the condonation moved to the delegated authority.

Mr Smith asked how the condonation process worked. Who had the final say and what happened if Parliament did not agree with TCTA? Did Parliament get to hear about its condonations? Where did Parliament fit into the whole accountability cycle? If Parliament was not involved, it should get involved as soon as possible.

Ms Manase replied that there was a budget for the approval of overdrafts and contingencies by the Board. The problem was with variation orders that were not approved by Treasury and therefore needed to follow a condonation process. The condonation process was rigorous and was not guaranteed as in the case of criminal elements. The protocol of the Audit Committee ensured that the same person who committed an irregular expenditure, was not the same person who investigated.

Expansions by Department of Water and Sanitation (DWS)
Mr Brauteseth asked about the Vuwani Power Plant project in Limpopo. Was Ms Zandile Makhathini engaged in court with the Special Investigating Unit (SIU), which was suing her for being involved in the awarding of the contract to Esko Construction?

Ms Makhathini replied that she was not involved in the awarding of the contract.

Mr Brauteseth asked for an explanation why SIU had lodged a civil claim against her as the third defendant for an amount of R140 million if she did not have anything to do with the awarding of the contract.

Ms Makhathini replied that she had been advised by her lawyer that the matter was sub judice and she could not engage the Committee on the matter.

Mr Brauteseth asked if she was aware of the Powers,Privileges and Immunities of Parliament Act which provided that anything said in Parliament by a witness had no effect on matters outside of Parliament. Could she comment on the authorisation of payments of R 9 million and R12 million to Esko Construction and Mr Skosana without work being done, the extension of the 45 week contract which enabled Esko and Mr Skosana to avoid penalties inherent in the contract, and the splitting of the contract between WK Construction, Esko Construction and Dixon Construction because Esko alone and Mr Skosana were not powerful enough to handle the whole contract.

Ms Makhathini replied that she was not involved in the awarding of the contracts and only knew about the failure of the contract when the project was almost complete. The submission to the court had a written submission by the engineer who advised her to sign under the circumstances of the project. She was only involved because of the position she occupied in DWS, which required her to preside over infrastructure projects. She was approached by the project manager and Mr Mafokeng who went on site and realised that there was need for an extension.

Mr Brauteseth asked who from DWS was responsible. Was it Mr Mafokeng who was responsible?

Ms Makhathini asked to prove her case in court and then report back to the Committee.

Mr Brauteseth said that the project was worth keeping an eye on and should an inquiry proceed in the future, the Vuwani project should be included.

Mr Ross was devastated by the revelation on deviations and expansions. Even though there were areas of excellence, DWS was so weak on compliance. It was reliant on deviations from Treasury or Parliament on long-term projects which could not be classified as emergency projects. DWS officials had expressed unbecoming behaviour and the Committee should investigate political influence from 2014 when the previous Minister had taken control of DWS. This was because there could have been a force pushing officials into deviations and expansions. Why was there no intervention from Treasury on the persistent breach of expenditure control since 2014, to the extent that officials did what they wanted and relied on deviations. Could invoices be provided for the R6.4 million maintenance of pipes in Free State to evaluate value for money? Could there be investigation into the R2.5 million for implementation of the Public Protector’s remedial action, R30 million for the communication strategy on Day Zero and R4.4 million to organise a public participation meeting. DWS rated fourth worst in deviations and expansions. What the Committee wanted was a functional department that cannot afford fiscal waste.

Mr Booi expressed disappointment in the DWS delegation, especially the Acting DG who was ill prepared, did not take responsibility, and seemed not to understand the PFMA. DWS had no regard for the Constitution and the fiscus. It was looting and it had no commitment or consciousness to assist poor people in the rural areas. There was no way that things would move if the same people remained in DWS. What was Treasury or Parliament going to do to assist DWS which had no regard for the law?

Ms Khunou said that this was the right Department for lifestyle audits to be done. There should be a clear indication from the Minister that nobody should be allowed to leave DWS in the process of investigation. In the next Medium Term Expenditure Framework (MTEF) period there were areas that had no budgets because DWS had committed beyond what it had budgeted for. This included amounts of R9.2 billion which were not used for service delivery but to enrich the pockets of departmental officials. The Hawks should be present in future meetings and the Inter-Ministerial Committee should be called to discuss DWS.

Ms Chiloane urged the Committee to start taking firm decisions on deviations and expansions because without decisions, the meeting was not useful. The 30 day payment schedule for work done should be adhered to.

The Chairperson highlighted the leadership instability at DWS which had about five DGs over the last four years. In the presence of such instability, the functioning, management and monitoring process became a problem, and developed a culture within departments. It did not make sense that the approval of contracts for Aecom SA started at management level and then only went to DBAC for noting. How was it an emergency when DWS advertised for three weeks and the process took two months? These questions were administrative but it had reached a point where they had become political due to the persistent level of disorganisation and mismanagement of public funds. Leadership was needed in DWS as soon as possible.

Closing Remarks by Minister
Mr Gugile Nkwinti, Minister of Water and Sanitation, informed the Committee that DWS had developed a turnaround strategy by first developing an organogram, which would assist in holding individuals accountable. He was pleased that the Committee had been tough on matters affecting service delivery and had been frank with DWS officials about this. The Acting Director General had been appointed on 30 May 2018 and given the responsibility of heading a new branch for planning, monitoring and evaluation, which would assist in answering concerns raised by the Committee. The appointment of a Director General for DWS had been discussed with the Minister of Public Service and Administration to resolve the matter. The Minister was happy that DWS had come with a big delegation so that it could see that the mood was not good. When dealing with the challenges faced by DWS, officials would be engaged on the basis that they had heard the Committee. DWS was going to do the best that it could and would report back to the Committee on its internal strategy. The Minister concluded by thanking the Committee for its support.

The sick note for Mr Mkhize was provided to the Committee.

The meeting was adjourned.

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